Why do ICOs use Token?

Tokens could  correct an imbalance in the way financial rewards are
distributed amongst investors, buyers, sellers and technologists.

Three questions to ask before purchasing a Token

1.Why would anyone want to use the token?
Investors would like to use a token because it is a viable form of funding
 or strategic form of investment. A token can be used to exchange with other
 coins e.g purchasing a token in Ethereum can be exchanged to get coins in
 Bitcoin. A token appreciates with an increase in its value and this is a beneficial
 factor to consider when investing in a new technology or cryptocurrency.

2.What category of people will like to buy this token and keep it?
Investors a lot of times like to take a risk when it comes to buying the tokens of a
new currency and this is because they understand the risk it involves and the benefits also.

3.Is there a better solution to the one the company is offering? 
Tokens give you a upper edge in the company creating the new currency and this is
because, a token  acts like a share or a stake in a company. A token is a stake or share
 that shows you have a right in part ownership of a  company. It is similar to purchasing
the shares of a company going public.


Tokens are for Financing the Project
When a company/firm wants to start or create a new currency, there is a need to source
 for funds for its implementation. ICOs is a way of doing this, investors in exchange for
tokens, gives the company real currencies in form of hard paper. These currencies are then
used in the financing of the project. This is like selling part of your cryptocurrencies to
 early buyers  so you would get the funds needed to finance your project.
Token Income is Regular Operating Income
Every time you attempt to sell your token, or exchange your token for other tokens,
 you should  be aware of the tax consequences i.e. you create a taxable event. If we
were to have two commodities: a car and a house. When an investor buys a car and
 then exchanges the car for a house, this can be referred to as a taxable event. When
you convert the tokens of a currency to that of another currency, you pay taxes.
IRS cares about the sale of cryptocurrency because:
Trading tokens involves an exchange of currency (buying and selling) which is a taxable
 event.

Converting cash into cryptocurrency could provide an avenue to launder money.

 To avoid the payment of taxes, especially if your project was open source, is to form
 a tax-exempt entity before you intend to go public with your ICOs.